Progress on GST to set the trend for equity markets: Analysts

Mumbai: Domestic macro-economic data, coupled with progress on getting the goods and services tax (GST) bill through parliament will determine the trajectory of the equity markets in the week ahead, market observers say.

What will also impact sentiments will be the position taken by foreign investors ahead of an imminent US interest rate hike, reforms and the pace of recovery in the industrial clusters near Chennai after incessant rains.

“We expect markets to remain volatile with a negative bias ahead of the US Federal Reserves (US Fed) meeting mid-month,” Vaibhav Agarwal, vice president and research head with Angel Broking, told a news agency.

The chances of a US interest rate hike were heightened after the US Fed Chairperson Janet Yellen made hawkish comments, indicating a certain hike in interest rates during the mid-December policy review.

On Wednesday, Yallen had said that she is looking forward to a US interest rate hike which will be seen as a testament to the country’s economic recovery.

A US rate hike could potentially lead to a massive pullback of foreign funds from emerging economies like India.

Furthermore, both the equity markets and the rupee are expected to open Monday’s trade weaker as a key US data – the non-farm payroll figures – showed healthy growth in November.

The data showed that the US economy created 211,000 jobs last month against expectations of 200,000.

“Going into the US Fed policy meet, an EM (emerging market) currency like the rupee will remain under pressure against the US dollar, as foreign funds keep exiting the equity markets,” Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told a news agency.

“The FPIs (foreign portfolio investors) have been consistently selling since March this year. They are reallocating funds invested in Indian equities which are increasingly being viewed as over-valued,” hr added.

Selling pressure by the FPIs has dragged the rupee’s value lower.

However, on a week-to-week basis, the rupee gained six paise at 66.70 to a US dollar (December 4) from its previous close of 66.76 (November 27). Nevertheless, the rupee had dipped to a 27-month low of 67.01 on Friday.

The value of the Indian rupee has been dented due to selling spree in the Indian debt and equity markets by foreign funds.

Figures from the National Securities Depository Limited (NSDL) showed that the FPIs sold Rs.3,362.77 crore or $503.32 million in the equity and debt markets from November 30 to December 4.

Data with stock exchanges showed that the FPIs sold stocks worth Rs.3,447.17 crore in the period under review ended December 4.

The FPIs have taken out Rs.23,352 crore in August-September. In November, the foreign investors offloaded stocks worth around Rs.9,000 crore.

On the other hand, the domestic institutional investors (DIIs) bought stocks worth Rs.2,308.29 crore during the just-concluded weekly trade.

The monthly industrial production and retail inflation figures are expected to be released on December 11.

In addition to the macro-economic data, progress or lack of it towards getting the GST bill passed in parliament will be a key trigger going forward, elaborated Pankaj Sharma, head of equities for Equirus Securities.

“Next week, we think the markets would strongly focus more on what stand the opposition parties take on the GST bill and how the winter session progresses,” Sharma told a news agency.

“If both the government and the (principal opposition party) Congress reach a resolution on GST, it will be positive for the markets. Otherwise, we expect the markets to remain range bound next week.”

The government needs to pass the GST bill in this session to meet the April 1, 2016, roll-out deadline, as just parliamentary approval is not sufficient for implementing the pan-India indirect tax regime.

The bill has cleared the Lok Sabha and is now with the Rajya Sabha, where the Congress and other parties have demanded a series of amendments.

The amended bill will be tabled in the Rajya Sabha and if passed, will again have to clear the Lok Sabha. Thereafter, it has to clear half of the 29 state assemblies before it is sent to President Pranab Mukherjee for his assent.

During the previous week, both the bellwether indices of the Indian equity markets ended in the red.

The barometer 30-scrip sensitive index (S&P Sensex) of the Bombay Stock Exchange (BSE) declined by 490.09 points or 1.87 percent to 25,638.11 points from its previous weekly close at 26,128.20 points.

Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) receded during the weekly trade ended December 4. It ended lower by 160.8 points or 2.02 percent to 7,781.90 points.

Many believe that Modi and BJP are now no longer is a favourable place

The new policies are not getting public approval

If situation isn’t handled carefully, 2019 elections will be steeper for BJP

For the Bharatiya Janata Party’s supporters, the growing belief that the party is no longer as favourably placed as before must be both bewildering and disheartening.

They must be wondering what could have gone wrong when the BJP was looking forward to not only a comfortable victory in 2019 but was also planning to celebrate the 75th year of India’s independence in 2022.

Is the Modi-magic vanishing? Wikimedia Commons

The talk of a “New India” under the BJP’s near-permanent control was in the air with both Nitish Kumar and Omar Abdullah from two opposite sides of the political spectrum saying that Narendra Modi faced no challenge.

Yet, the scene has changed. What is more, it has happened so over a rather short period of time. Among the reasons for it may be the BJP’s electoral setbacks in, first, the Chitrakoot assembly byelection in Madhya Pradesh in November last year, the near-defeat it faced in the Gujarat assembly polls in the following month and finally the huge margins by which it recently lost three byelections in Rajasthan.

Before these contests, the successes of the Congress’s student wing in the Delhi University and of a leftist union in the Jawaharlal Nehru University student union elections over the Akhil Bharatiya Vidyarthi Parishad (ABVP), the saffron brotherhood’s student wing, were significant pointers to the emerging trends.

BJP will definitely see a tough time in 2019 elections. Wikimedia Commons

The new scenario has now led to conjectures about a fall in the BJP’s number of Lok Sabha seats to 200/220 from the present 282 in a House of 545. Since these figures have been mentioned by a saffron scribe, it is obvious that assessments on these lines are currently on in the BJP. Another scribe has identified the absence of effective speakers other than Modi as one of the factors behind the BJP’s slide in popularity.

Perhaps one of the first to say openly that the Modi magic was fading was a Shiv Sena spokesperson, who also noted the change in Rahul Gandhi’s “body language” and his transformation into a credible leader. Not long after, the Sena decided not to align with the BJP in 2019.

The BJP’s old ally is not the only party to begin thinking of greener pastures. The Telugu Desam Party, too, has expressed its displeasure over the “neglect” of Andhra Pradesh in the Union budget. To forestall a rupture, the BJP has offered the Shiv Sena 144 seats in Maharashtra in an assembly of 288 seats, but the generous gesture is more indicative of the BJP’s nervousness than of magnanimity.

So, what went wrong for a party which was riding high during the first three years of its tenure?

First and foremost reason is its failure to usher in the promised “achhe din” or better days because of a sluggish economy. The scene might have been better but for the twin blows of demonetisation, which dealt a blow to small businesses, and the shambolic rolling out of the Goods and Services Tax (GST), which also unsettled the traders and businessmen.

It seems unlikely BJP will be able recreate its historic win in 2019 elections. Wikimedia Commons

The second reason is the widespread rural distress which eroded the BJP’s influence in Gujarat. As a party essentially of urban lower middle class areas, the BJP’s connection with the countryside has never been very strong. In its Jan Sangh days, the party once even forgot to adopt a resolution on agriculture till the lapse was noticed at the last minute.

Modi is now said to have sought the advice of farming experts to reach out to the cultivators. But the move is unlikely to pay immediate political dividends.

To compound the BJP’s problems, the Bharatiya Mazdoor Sangh (BMS), the Sangh Parivar’s labour wing, has raised the red flag over the “disappointing” Union budget.

Another explanation for the BJP’s woes is undoubtedly the inability to control the saffron goons, who have been running amok to impose their diktats on diet, inter-faith romance and film scripts, among other things.

The rampages of the cow vigilantes have hit the meat and leather industries and resulted in ageing cows being let loose by their owners to roam the countryside and city streets to forage on their own. Hence the proposal to impose a fine on the “guilty” owners.

The result is the prevalence of an atmosphere of intolerance of the kind which made a section of the intelligentsia return the awards which they had once won in protest against the deteriorating state of affairs in the country.

Prime Minister, Narendra Modi ‘s new policies are not being received well by the public.

Perhaps the BJP’s only solace at the moment is that its opponents haven’t been able to get their act together. Moreover, the fissures in their ranks are palpable with a rift in the Communist Party of India-Marxist (CPI-M) over whether to align with the Congress in an anti-BJP front, and the Bahujan Samaj Party (BSP) teaming up with the Janata Dal (Secular) in Karnataka on the eve of the assembly elections.

There are also said to be reservations among the senior opposition leaders about accepting Rahul Gandhi as the leader of an alliance.

Karnataka will be the next big electoral battle for the BJP. If it can dislodge the ruling Congress in the state, it will be able to brush aside the party’s setbacks in Gujarat and Rajasthan. Otherwise, the road to 2019 will seem steeper. IANS